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C.I.T. Kolkata I Versus M/s. Vivek Engineering & Casting Ltd.

2016 (1) TMI 944 - CALCUTTA HIGH COURT

Bad debt claim - ITAT allowed the claim - as per revenue bad debt was never shown as income in the preceeding years and the money was not held as stock in trade as the assessee was not engaged in the business of money lending - Held that:- Tribunal as the last fact finding authority has come to the conclusion that more than 50% of the capital of the assessee is deployed in money lending. Therefore, the fact that the assessee is in the money lending business cannot be doubted. All the points adva .....

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t and admitted are as follows:- 1. Whether, on the facts and in the circumstances of the case, the ld. Tribunal has erred in upholding the order of the Commissioner of Income-tax (Appeals) without considering that the conduct of the assessee towards claiming bad debt was not bonafide and honest as the amount shown as bad debt was never shown as income in the preceeding years and the money was not held as stock in trade as the assessee was not engaged in the business of money lending ? 2. Whether .....

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which ₹ 2,70,00,000/- related to the principal amount of loan advanced to one M/s. Dinesh Kumar Singhania and Company. The balance amount of ₹ 4,58,660/- was on account of interest. The assessing officer allowed the claim for bad debt insofar as the interest part was concerned amounting to a sum of ₹ 4,58,660/- but the claim with regard to bad debt for the principal sum of ₹ 2.70 crores was not allowed for the following reasons:- (a) The amount of ₹ 2,70,00,000/- wa .....

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read with Section 36(2), bad debt is allowable as deduction if the four conditions therein are fulfilled (i) the debt or loan should be in respect of business carried on by the assessee, (ii) the debt should represent money lent in the Ordinary course of money lending or banking or should have been taken into account in computing the income of the assessee of the accounting year or of an earlier accounting year, (iii) the amount of debt or loan should have become bad and (iv) the amount should .....

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mpany has been carrying on the business of lending and investment and has also earned huge interest on such money lending business as indicated in the above figures. The amendment of Section 36(1)(vii) by Finance Act w.e.f. 01-04-89, the assessee is not required to establish that the debt has become bad in the previous year and mere written off of the bad debt in the accounts is sufficient as held by Gujarat High Court in the case of Girish Bhagwat Prasad reported in 256 ITR 770. . . The Revenue .....

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to 2003 - 04 and the same has been assessed as business income. Thus, it is clear from the facts brought on record that the assessee was also doing money lending business apart from business of manufacturing of iron and steel items. Thus, the basic reason on which the Assessing Officer has disallowed the claim of bad debt fails. 11. Regarding the observation of the Assessing Officer that the debt was already bad in earlier year. We agree with the submission of the Ld. Counsel on this issue that .....

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sfaction is reached and the amount is written off in the account, the same is to be allowed. Hon ble Calcutta High Court in the case of CIT -Vs - Coates of India Ltd. (1998) 232 ITR 324 (Cal.) has held that In order to claim deduction under Section 36(1)(vii) of the Income Tax Act, 1961, as it stood at the relevant time, the assessee is required to show that, on the facts and circumstances pertaining to a particular debt, he has taken an honest judgment that the said debt has become a bad debt. .....

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ed that the conditions were not fulfilled by the assessee in order to claim deduction under Section 36(1)(vii) which reads as follows:- 36.(1)(vii) Subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]. This submission is incorrect because without such writing off in the previous year, the matter could not have come up before the assessing officer. She then submitted t .....

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